Star’s brother caught in Sears layoffs
Employees who were laid off include Mike Myers’ sibling, who starred in company ad
It took less than one minute for nearly half of Sears Canada’s head office employees in Toronto to be let go before they were shown the door at a meeting at the downtown Metro Convention Centre on June 22.
Peter Myers, 59, a senior director of planning at Sears Canada, was sitting in the front row. In 2014, Myers starred in an amusing commercial with his brother, comedian Mike Myers, that has logged more than 1.8 million views on YouTube in English and in French.
In the ad, Mike peppers his older brother with questions about rumours that Sears Canada is closing. Peter reassures Mike that’s not happening.
“We’re not going anywhere. You of all people should know not to believe everything you read in the papers,” Peter says.
Three years later, Peter was in a conference room with colleagues being told by a Sears official that they were being laid off because Sears was restructuring. That same morning in a downtown courthouse, Sears Canada obtained temporary protection from creditors under the Companies’ Creditors Arrangement Act (CCAA), allowing them to close 59 stores and let go 2,900 employees without paying severance, in an effort to keep part of the chain in business.
At the same time, at a meeting at the Fairmont Royal York Hotel on Front St., hundreds of Sears Canada employees were being told they still had jobs.
At the convention centre, following the brief announcement by a Sears spokesperson, the company’s Employee Assistance Program (EAP) representative made a few consoling remarks and pointed to the exit, recommending employees take advantage of taxi chits being offered to get them home. “It’s a rough day,” he said. The employees were not told in the meeting that they would not be getting severance. They learned that when they opened information packages they picked up on their way out of the room.
All told that morning, 500 of the 1,185 people who worked at Sears Canada’s head office in Toronto were let go.
Later they learned that Sears Canada was also planning to seek approval from the court to stop topping up a deficit in the pension plan, of which Myers is a member, and to stop paying pension benefits, including dental and health benefits.
In court Thursday, Sears reversed that stance, agreeing to keep paying the deficit and the benefits until the end of September in order to avoid a legal challenge from lawyers representing employees.
The severance issue was not resolved.
The situation, on the heels of long fights involving employees of Nortel Networks Corp., Stelco Inc. and Vertis Communications, has caught the attention of politicians.
Ontario Premier Kathleen Wynne told reporters at Queen’s Park on Thursday that the Ministry of Economic Development is “paying very close attention to what’s happening,” and that “we are very concerned when a large number of people like this are at risk of losing not only their jobs, but their future security.”
At this point in the process, there is no real role for the province in the Sears situation, Wynne said. But as the economy transforms, she added, workers are being displaced and the government needs to do what it can to support families.
The provincial NDP tabled a nonbinding motion in May 2016 calling for better pension protection for workers at companies going through restructuring and bankruptcy, NDP MPP Catherine Fife said on Thursday. It was supported by the Wynne Liberals and the Progressive Conservative Party under Patrick Brown.
“Unfortunately the premier did not act on this and we have another company giving creditors priority over the employees that built the company,” Fife said.
Peter describes himself as an extremely positive person, and he can see more than his own side to the story, pointing to the suppliers who won’t be paid as a result of the CCAA filing. He understands that letting go of three people to save seven is ultimately for the greater good, but the existing legislation seems to him one-sided.
“I have a feeling there is something legislative that has to change, but everything they are doing is legal,” Peter said.
In a business insolvency, employees generally have to line up behind secured creditors for severance that they would ordinarily be entitled to. Someone like Peter, who would have celebrated 36 years at the company in August, would have been eligible for about two years of payments, according to labour lawyer Jon Pinkus of Samfiru Tumarkin LLP.
“Arguably we have it wrong right now. Arguably we have an equation where the most vulnerable people are those that are protected the least,” Pinkus said.
He said Sears Canada abruptly broke off discussions with the firm’s lawyers, who had been negotiating severance settlements on behalf of employees who had been let go before the CCAA application.
Sears named its pension obligations as one of the reasons it sought creditor protection. The pension has a deficit of $267 million, which the company has been paying down at a rate of about $3.7 million a month, payments Sears argued in its application for CCAA it could no longer afford.
As of Dec. 31, there were 16,921 members in the defined benefit component of the Sears Pension Plan — 13,121 of them retired.
The average cost of paying pension health and dental benefits and life insurance premiums is about $1.045 million a month, according to the company.
When Target exited Canada in 2015 after a disastrous attempt to expand outside the U.S., Target Corporation set up a $90-million (U.S.) fund to pay severance to 17,600 Canadian Target workers, to ensure that all employees received 16 weeks of termination pay. While Sears Canada and Sears Holdings in the U.S. are separate entities, Eddie Lampert, chief executive officer of Sears Holdings, together with his ESL companies and Fairholme Capital Management, is a majority shareholder.
A spokesperson for Sears Canada declined to comment for this article, pointing instead to the news release filed by the company on June 22.
“Getting the federal government to move on bankruptcy and insolvency protection for employees was nearly impossible,” said Susan Rowland, a lawyer who focused her career on pensions and benefits law, and an expert in restructuring and funding pension plans who worked with provinces and the federal government on pension issues.
“They didn’t want to in any way impede the flow of lending to companies that wanted to go into business or carry on a business.”
The reason for the imbalance in the system, Rowland and others say, is that if a company trying to restructure had to pay employees severance and top up the pension plan, it could prove too expensive to make a restructuring possible — no one would lend to a company with so many liabilities. Instead of restructuring and possibly continuing to operate, employing thousands directly and indirectly, the company would be forced to shut down entirely.
While restructuring, companies typically set aside millions of dollars to continue paying top executives, as Sears has done for 43 executives, but there is a reason for that too, Rowland said.
“The 43 people at head office, if they quit, the business is gone, all you have left is some odds and ends of inventory. You have to keep your key people back and you have to pay them to stay and not go looking for alternate employment,” Rowland said.
The good news for Sears Canada pensioners is that if their pension fund does come up short, they may qualify for payments under Ontario’s Pension Benefits Guarantee Fund (PBGF).
“In the event of the wind up of the Sears pension plan, the PBGF could provide financial assistance if Sears Canada is unable to fund the wind up deficit,” according to Malon Edwards, a spokesperson for the Financial Services Commission of Ontario (FSCO), which administers the Pension Benefits Act and the PBGF. With files from Kristin Rushowy
“We are very concerned when a large number of people like this are at risk of losing not only their jobs, but their future security.” PREMIER KATHLEEN WYNNE